Listed public sector companies post big gains in market cap

Listed public sector companies post big gains in market cap

India’s public sector companies emerged as big gainers of the booming stock market during 2007.

Save for a few hiccups, such as the resignation of Prahlad K. Basu as chairman of Board for Reconstruction of Public Sector Enterprises (BRPSE), the public sector units, or PSUs, saw a slew of partial sales and listings on bourses.

Even with less than four dozen in number as listed entities, the PSUs account for some 20% share of the overall market capitalization of the more than 4,000 entities at the bourses. In actual terms, led by Oil and Natural Gas Corp. Ltd and NTPC Ltd, total market capitalisation of the listed PSUs was Rs14.5 trillion toward the end of the year. ONGC was the largest contributor with a market cap, nearly 17% of the total PSU market cap. NTPC’s share in the PSU market cap is about 13%.

MMTC Ltd soared and traded as high as Rs56,931 before coming back down to Rs28,143, still well above its 52-week low and, along with NMDC, entered the Rs2 trillion market cap club. The government holds more than 98% stake in the companies.

But this came along with a turf battle among the top listed PSUs—NTPC and Bharat Heavy Electricals Ltd (Bhel), backed by their ministries. NTPC wanted to recreate another Bhel, either on its own or with a partner, to ensure that it gets all the machines and equipment for its upcoming power projects. But Bhel opposed it strongly, saying it had the capability to meet the national demand and there should be no duplication at the cost of national resources. The outcome of this turf war would be known in the future.

Meanwhile, the government gave more powers to the state-owned entities, creating more of the so-called Navratna and Mini-ratna entities, and increasing their decision making powers.

Bharat Electronics Ltd, Hindustan Aeronautics Ltd and Power Finance Corp. were conferred the Navratna status, giving them more financial and administrative powers. With the conferment of the coveted status on these three firms, the Navratna club now has 12 public sector enterprises. The status enabled the three PSUs to forge joint ventures in India and abroad, which can be up to 15% of their net worth or 1,000 crore, whichever is lower, without taking prior permission of the administrative ministry. Besides, the board also has powers to decide on merger and acquisitions.

Heavy Industries minister Santosh Mohan Deb said four PSUs—National Aluminium Co., NMDC, Power Grid Corp. of India Ltd and Rural Electrification Corp. —would be given Navratna status when they appoint independent directors.

The financial autonomy package announced on the basis of the recommendations of the empowered committee, headed by Nitish Sengupta, left very little to desire for the PSUs to acquire competitive age within the country but also hone up skills for global exposure and acquisition.

Steel Authority of India Ltd and Coal India Ltd are globe trotting for mining prospects, while oil giants—ONGC and Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd made new alliances with global players like steel tycoon Lakshmi Mittal or acquire oil equity in Russia or far off Africa.